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09-22-2015

Filed Electronically Via Email

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule; RIN-1210-AB32

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, NW

Washington DC 20210

Office of Exemption Determinations 

Employee Benefits Security Administration

U.S. Department of Labor 

200 Constitution Avenue, NW

Suite 400

Washington DC 20210

RE: Second Comment Letter on the 2015 Proposed Definition of the Term “Fiduciary”; Conflict 

of Interest Rule-Retirement Investment Advice – RIN 1210-AB32

RE: Second Comment Letter on Proposed Best Interest Contract Exemption – ZRIN 1210-ZA25

RE: Second Comment Letter on Proposed Amendment to and Proposed Partial Revocation of 

Prohibited Transaction Exemption (PTE) 84-24 for Certain Transactions Involving 

Insurance Agents and Brokers, Pension Consultants, Insurance Companies and Investment 

Company Principal Underwriters – ZRIN 1210- ZA25

Dear Ladies and Gentlemen

On behalf of Metropolitan Life Insurance Company and its affiliates (“MetLife”), and further to 

MetLife’s initial comment letter of July 20, 2015, I want to take this opportunity to reaffirm and 

supplement those comments and address key issues discussed by many panelists during the 

public hearings that took place on August 10th– 13th, 2015. 

Eric T. Steigerwalt

Executive Vice President

U.S. Retail

11225 North Community House Road

Charlotte, NC 28277

Tel: 980-949-4400
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MetLife and the Department are aligned in the desire for a simplified Best Interest 

Contract Exemption that will meet some key goals described herein. 

I. Comments on the Best Interest Contract (“BIC”) Exemption.

In recognition of the important and valuable income, longevity and death benefit 

guarantees that variable annuities offer individuals saving for retirement, MetLife urges the 

Department to modify the BIC exemption to make it something that issuers of variable 

annuities sold to, or as, IRAs can use. A modified BIC exemption would:

 broadly permit insurance companies to continue common and transparent fee and 

compensation practices, 

 avoid disruption of advisory services to investors,

 preserve the availability of variable annuities in the market place to investors of all 

income levels,

 avoid increasing compliance costs passed on to consumers including plans, plan 

participants and IRA owners,

 achieve the Department’s goal of providing consumers with a fiduciary contract,

 provide more compensation and fee disclosure to consumers. 

To accomplish these goals, the BIC needs to be simplified and restructured. MetLife proposes a

simplified BIC exemption for variable annuities, with the following requirements: 

Written Contract:

MetLife proposes the use of a unilateral contract issued by the entity with supervisory 

authority for the sales representative (the “Supervisory Entity”). Unilateral contracts are 
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common when institutions engage in contractual relationships with numerous individuals in the 

same manner. They are also regularly enforced in courts of law in all states1. Since consumers 

do not have the opportunity to negotiate these types of contracts, any ambiguity is routinely 

interpreted against the drafter and limitations on liability must be clear and conspicuous in 

order to be enforceable. MetLife requests a simple one-page unilateral contract stating that it 

is effective with the decision to purchase a MetLife product and or investment allocation and 

advisory services from a sales representative of the Supervisory Entity or an affiliate. The 

contract would be required to have the following characteristics: 

 A simple introduction explaining the basics of the transaction. Example: “You have 

agreed to purchase a variable annuity from MetLife. MetLife reminds you to carefully 

review all fee information provided to you by the sales representative including, but not 

limited to any mortality and expense charges that will be assessed annually against your 

benefit base (the guaranteed tracking account within your annuity). We also call your 

attention to the surrender charge schedule provided by the sales representative, setting 

forth the charges that will be assessed in the event that you decide to terminate your 

variable annuity contract before the date set forth in the surrender charge schedule.” 

 A clear statement of “best interest” defined with reference to ERISA’s prudence

standard. Example: “In making this sale, the sales representative has discussed your

retirement savings goals with you and believes this transaction is in your “best interest” 

 

1

See 50 state study on unilateral contracts from the Pillsbury law firm at: 

http://www.pillsburylaw.com/siteFiles/Publications/0C62DFD605F0471619ADF0E2E5576E98.pdf
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as defined by the Department of Labor. This means that an objective person with 

knowledge of the information you disclosed about your general retirement situation 

and goals and with knowledge of this product and substantially similar products 

available to you would believe that it was reasonable for you to purchase this product. 

If you hereafter request regular and on-going investment advice on allocating assets and 

making investments from the sales representative or any other MetLife representative, 

then the determination that the subsequent advice is prudent and the compensation for 

such advice are reasonable will be made at the time you request that advice. A more 

complete definition of this legal standard can be found in the applicable law (ERISA 

section 404(a)(1)(B)).” 

 A representation about accuracy of information. Example: “Your sales representative 

will act with care and diligence in presenting information about this product that is 

accurate and will not misrepresent material information about the product, its fees or 

characteristics.”

 A representation about reasonableness of compensation and conflicts. Example: “Your 

sales representative may receive cash and non-cash compensation for selling you this 

product. Sales representatives affiliated with MetLife may sell both MetLife products 

and products from other carriers. Your MetLife sales representative may receive 

greater compensation for selling a MetLife product rather than a product from another 

carrier. Please see the disclosures provided regarding cash and non-cash compensation. 

MetLife believes that the compensation is reasonable in relation to the total services 
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provided, the guarantees offered by the product, and the time it takes to explain these 

guarantees to customers.” 

 The contract would include an arbitration clause. As noted on page 30 and 31 of 

MetLife’s original comment letter, statutory or regulatory limitations on arbitration 

clauses violate the Federal Arbitration Act, encourage class actions, result in windfalls 

for unrelated third parties and produce few or no benefits to injured parties. With 

regard to DOL authority to limit arbitration clauses MetLife refers to and incorporates 

the argument put forth by Eugene Scalia of the law firm Gibson Dunn & Crutcher in 

Section II (C) of his comment letter submitted to the Department on July 20, 2015. 

 The contract will be entered into exclusively by the Supervisory Entity responsible for 

the sales representative that made the sale.

 The contract will be delivered at the same time that the annuity contract is delivered or 

when the customer commits to enter into an advisory agreement. As noted on page 29 

of MetLife’s original comment letter, delivery of contracts before customers have 

decided to transact business is confusing and of no value to the customer. State 

insurance laws require delivery, whether electronic, in-person or by mail of the annuity 

contract. Consequently, insurance companies have a compliance structure to ensure 

such delivery. If the “Best Interest” contract were delivered together with the annuity 

contract and in the same manner as required by applicable insurance law, companies 

would be able to track and verify delivery of this document. 

Impartial Conduct Standard:
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MetLife believes that the Impartial Conduct standard makes the warranties proposed

by the Department unnecessary. As proposed above, the contract with the customer would 

state that the advice to purchase the product meets ERISA’s prudence standard. The contract 

would also state as a representation, instead of a warranty, that the compensation was 

reasonable in relation to the total services provided, complexity of the product and guarantees 

offered by the product. This determination takes into account the value of all services and 

benefits provided. MetLife has also proposed that the contract with the customer make a 

representation (not a separate warranty) that the sales representative will not make any

material misrepresentation of the product, its fees or operation. This expresses the duty of 

loyalty in a way that is understandable to the customer.

Disclosure Requirements:

During the public hearings many panelists expressed concern with the Department’s 

economic analysis, arguing that it underestimated the cost of compliance to the industry. 

MetLife reiterates and references the cost concerns expressed in pages 3 through 5 of our 

original comment letter. MetLife notes that it does not and cannot, without investing millions 

in IT and accounting restructuring, track revenue to MetLife or affiliates on a per sale or per 

customer basis. Any entity that makes such investment would have to pass those costs along 

to consumers through dramatically higher fees, and any attempt to estimate such revenue 

without making those investments would be inaccurate at best. MetLife can only estimate 

revenue within a range for a particular product series. MetLife has serious concerns that both 

PTCEs 84-24 and BIC potentially require revenue to MetLife, affiliates and the sales 

representative to be tracked and disclosed for each sale. Consequently, MetLife reiterates its 
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request that the Department set a uniform standard for disclosing “reasonable compensation” 

on an entity basis and third party compensation disclosed as a potential conflict of interest. 

As to compensation disclosure, the Department is well aware that insurers and other 

financial institutions have expended a great deal of time, effort, and resources to incorporate 

the disclosure requirement mandated by the regulations under sections 408(b)(2) and 404(a)(5) 

of ERISA into their retirement practices. These provisions currently permit ranges to be used to 

disclose compensation.

(1) In MetLife’s view, only simplified and realistic disclosures which follow the 

guidance under ERISA sections 408(b)(2) and/or 404(a)(5) ought to be required. The American 

Council of Life Insurers’ comment letter of July 20, 2015, at pages 36-38 describes the simplified 

disclosure requirements MetLife believes would be workable under the BIC Exemption. MetLife 

endorses that comment. 

(2) The record retention requirements in Section IX of the BIC Exemption would 

require retention of an extraordinary amount of data. In MetLife’s view, the data to be 

retained would not help retirement investors make better informed investment decisions. The 

cost of maintaining this data would be significant and eventually passed on to consumers. 

Accordingly, MetLife urges the Department to delete the Section IX proposed data retention 

requirement in its entirety and retain the Department’s standard six-year record retention 

requirement described in Section V of the BIC Exemption proposal.
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Each of the modifications enumerated above are critical in order for MetLife and other 

variable annuity issuers to utilize the BIC exemption and continue to make these annuity 

products with an array of valuable guarantees available to consumers of all income levels.

II. Additional Comments to the Proposal.

A few key requests regarding the DOL proposal are worth reaffirming following the 

testimony of many of the panelists at the hearings. 

(1) Applicability Date Should Be Delayed.

MetLife notes that most panelists did not believe compliance within a short period of 

time would be feasible. MetLife agrees with this assessment. Given the complexities of this 

proposed regulation and the exemptions, service providers will need at least three years to 

comply with the rules, rather than the proposed eight-month period.

(2) Interpretive Bulletin 96-1 Should Be Adopted in Its Entirety.

As requested by numerous expert panelists during testimony, Interpretive Bulletin 96-1 

regarding investment education must be preserved. MetLife shares the belief that IB 96-1

provides the best avenue for educational assistance to participants and IRA owners. The

education carve-out should adopt the entirety of the Bulletin, including the ability to identify 

specific investment options that meet allocation model results. As noted during testimony, if

specific investment alternatives are subject to a fiduciary standard, then sales representative 

will avoid reviewing them with potential customers to avoid legal risk which will have the effect 

of reducing consumers’ understanding of investment alternatives. This does not assist those 
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most in need. Only sophisticated investors would be able to implement an allocation model 

without the identification of specific investment options.

(3) Grandfathered Relief For Ongoing Relationships Prior to Effective Date.

As noted in more detail on pages 32 and 33 of our original comment letter, MetLife 

strongly believes that advisory arrangements entered into, and annuity contracts sold, prior to 

Effective Date of the Proposed Regulation should be exempted from compliance with the new 

rules (“grandfathering”). Altering the legal landscape in which these products operate postsale is unfair to both the service provider and the consumer. As noted on page 32 of our original 

comment letter, the sheer burden of contacting close to a million existing IRA customers with a 

revised contract and re-stated fees when the customer did not request such documentation or 

modifications to the relationship, would cause enormous confusion, pose significant expense 

and in many cases would make the impacted products financially unviable. Furthermore, any 

contractual or fee modifications would likely require approval by the relevant insurance 

departments for each state; each of which would have the authority to deny or modify these 

changes.

(4) PTCE 84-24 Should Continue to be Available to Cover the Sale of Annuity 

Products

Prohibited transaction exemption 84-24 should continue, as proposed by the 

Department, to be available to cover the sale of insurance products and annuities other than 

registered products sold as/to IRAs. The definition of “commission” in PTCE 84-24 should not 

change. Further, the “Impartial Conduct Standard” or “Best Interest” requirement should be 
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the ERISA Section 404(a)(1)(B) prudent person standard. PTCE 84-24 provides a significant 

amount of protection, information and disclosures to purchasers of annuity products, and is 

one of the most comprehensive and effectively utilized exemptions.

MetLife is, however, concerned that the exclusion of “revenue sharing payments, 

administrative fees or marketing payments” from the definition of “commission” could raise 

questions with respect to longstanding industry practice under which variable annuity issuers 

receive revenue sharing payments in connection with the underlying investment options made 

available through a variable annuity contract. Section III(c) of PTE 84-24 as currently in effect, 

and Section I(a)(3) of PTE 84-24 as it is proposed to be amended, exempt the purchase, with 

plan assets, of an insurance or annuity contract from an agent or broker. The industry has 

always understood the scope of the exemptive relief to cover not only the sale of the variable 

annuity itself but also the receipt of revenue sharing payments by a company resulting from the 

allocation of purchase premium among the underlying investment options. Revenue sharing 

payments under variable annuities are made not to the agent, but to the company itself, and 

are frequently applied to offset various insurer expenses related to the servicing the contract 

(e.g., recordkeeping expenses). MetLife urges the Department to confirm in the preamble 

explanation accompanying the final exemption that the relief available under Section I(a)(3) 

covers the insurer’s receipt of revenue sharing payments from investment options under the 

contract, fees paid to the insurer under the contract in addition to the purchase of the contract 

itself.

(5) Welfare Benefit Plans Should Be Excluded.
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As noted on pages 19 through 22 of our original comment letter, MetLife believes that 

the requirements of the Proposed Rule should not apply to recommendations made to a plan, 

participant, or beneficiary of a plan that do not relate to investments but rather are incidental 

to the sale, holding, or disposition of insurance to fund welfare benefits (e.g., dental, life, vision,

etc.). This would address the concern, aired at the hearing, that certain welfare plans receive 

true investment advice, but would avoid inadvertently capturing insurance products with no 

cash accumulation feature sold to health and welfare plans. Additionally, since no legal or 

economic analysis was undertaken by the Department relating to health and welfare plans, 

MetLife requests that the Department defer consideration of investment products and advice

sold to welfare benefit plans until such analysis is conducted and appropriate exemptions can 

be drafted.

If the Department decides to apply the proposed regulation and PTCEs to welfare 

benefit product sales with an accumulation feature or cash value, then the following 

modifications are necessary to avoid disruption of sales and the operation of welfare benefits 

products currently held by customers: 

 A small accumulation carve-out for supplemental life purchased to accompany an 

employer’s group life plan. We suggested $15,000 (with an inflationary factor) in our 

original letter.

 An expansion of the large plan carve-out in recognition of the fact that almost no 

welfare benefit plans have assets of over $100 Million and many “frozen” plans have 

less than 100 participants even when sponsored by very sophisticated employers. We 
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suggested that with the advent of the Affordable Care Act, (which requires large 

employers to provide their employees with minimum essential health benefits), any 

employer with over 5,000 U.S. employees is familiar with ERISA welfare benefit plans 

and the complexities of purchasing insurance products to fund them and should

reasonably fit within the large plan carve out.

 A carve-out for funding vehicles (often sold to closed life plans) that: (a) have no cash 

value that can be distributed to the customer or (b) credit a fixed-rate of return on 

deposited assets. These products are primarily sold to guarantee welfare liabilities 

(particularly life plan liabilities) and it serves the participants and the plans to have these 

benefits better secured in a low-risk or guaranteed manner. 

 Grandfathering provisions that clearly exempt welfare benefit products:

o for sales and operation of the product prior to the applicability date of the final 

regulations; and,

o for coverage like supplemental life that is renewed by the customer on a periodic 

basis, suspension of application of the final regulations until the coverage is 

renewed. (To do otherwise would require re-negotiation of the insurance contract 

and in many cases a new RFP by the Plan when a valid contract is in place). 

(6) The U.K. Is Undertaking a Government Study with the Intent of Modifying a Similar Rule

That Went Into Effect in 2012

As MetLife explained on pages 5 and 6 of our original comment letter, the United 

Kingdom (“U.K.”) implemented investment advice rules in 2012 following the U.K.’s Retail 
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Distribution Review (“RDR”). Amid continued concerns about an “advice gap” resulting from 

the RDR reforms2, the government of the United Kingdom recently announced that it would 

formally examine how financial advice, considered in its broadest sense, “could work better for 

consumers.”3 The Financial Advice Market Review (“FAMR”) was launched in August 2015, 

after comment letters were submitted to the Department. The scope of the FAMR signifies the 

U.K. government’s concerns over unintended consequences of the RDR reforms and other 

recent changes. The FAMR is intended to examine the advice gap and regulatory or other 

barriers firms may face in giving advice with respect to all types of retail financial products 

including pensions, savings, mortgages, and insurance. The FAMR will also consider the 

proportionality of the RDR reforms and their impact on the affordability and availability of 

financial advice and products. The UK government intends for the FAMR to identify reforms 

that would empower consumers to make effective decisions about their finances, facilitate a 

broad-based market for the provision of financial advice to all consumers, and create a 

regulatory environment which gives firms clarity for competing and innovating to fill the advice 

gap. The FAMR’s objectives demonstrate the high level of concern over the impacts of the RDR 

and other new regulations.

MetLife urges the Department not to follow the same path as the U.K. by finalizing 

exceedingly restrictive regulations that would limit access to financial advice and solutions to 

those consumers who need it most. 

 

2

See statements of Martin Wheatley and John Griffiths-Jones noted on page 5 of MetLife’s comment letter dated 

July 21, 2015.

3

Statement on the Financial Advice Market Review (Aug. 3, 2015), available at 

https://www.fca.org.uk/news/financial-advice-marker-review.
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We appreciate the Department’s time and attention. Should any questions arise in 

connection with our comments, or if MetLife can provide any assistance to the Department in 

connection with the Proposed Regulation and PTCEs, please contact Phyllis Zanghi at 980-949-

3362 or 11225 North Community House Road 8.962, Charlotte, NC 28277.

Sincerely,

Eric T. Steigerwalt

Executive Vice President